The forecasted return to surplus for 2012-13 will deliver important national benefits, but economists have warned that the savings have come at a high price to business.
The business community will not receive much relief as a result of the 2012/13 Budget, and many existing programs will remain unchanged. According to one peak body, the Government has made a strategic decision to favour a short-term boost for families and low-income earners at the expense of the longer-term drivers of economic growth. “In particular, the additional taxes and costs imposed on industry will undermine the ability of business to make the critical longer-term investments needed to boost productivity, improve our global competitiveness and lift employment,” Australian Industry Group CEO Innes Willox said.
No cut in profits tax: 1% company tax cut taken off the table
Wayne Swan sidelined several promised business reforms, abandoning the Government's planned company tax cut of 1%. The Treasurer blamed a lack of Coalition and Greens support behind scrapping the tax cut, and the $3.6bn will now be redirected at measures to support families and small business – dubbed Spreading the Benefits of the Boom. “We wanted to do more for business with a company tax cut, but the Opposition’s negative tactics have prevented that tax cut flowing,” Swan said. The Treasurer offered little detail on a timetable for further reform measures – such as alternative changes to the company tax system.
The move to ditch the company tax cut has been slammed by employer groups. “It is a dreadful breach of promise and one which is going to sit very badly with hundreds of thousands of business people who are running businesses, working hard and are not getting the tax relief they were promised,” ACCI chief executive Peter Anderson said. He added that it was the Government's commitment that the company tax reduction would be delivered because it would be funded by the mining tax – however that promise has not materialised.
Easier to bring in migrant workers & further changes to LAFHA
The Government will reserve up to 16,000 places next financial year to sponsor skilled migrants to regional areas. Immigration Minister Chris Bowen said visa applications for regional employment will continue to get high priority for processing, namely through the introduction of Regional Migration Agreements.
In addition, after a successful trial, the Seasonal Labour Mobility Program will begin in July, bringing up to 12,000 Pacific workers to Australia over four years, mainly to pick fruit and vegetable crops. Workers will be invited to apply from East Timor, Kiribati, Nauru, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu.
The Government is also cracking down in what it calls “increasing exploitation and misuse” of the living-away-from-home tax concessions (LAFHA) for “highly-paid executives and foreign workers” who maintain second homes for work reasons. Treasurer Swan said maintaining two homes indefinitely should not deserve a “massive tax perk”. However, he said the tightening of concessions in the Budget will not affect tax treatment of travel or meal allowances, nor will it affect fly-in fly-out arrangements for mine workers and others.
According to analysts at Moore Stephens, the tyranny of distance and the difficulty Australian companies face in attracting foreign workers has been ignored by the decision to cut the tax concession. “Without a LAFHA concession Australia’s ability to attract skilled workers faces a greater challenge in the future,” the consultancy firm said.
Budget positives for employers
Ai Group assured there are nevertheless a number of positives in the Budget for industry. These include increasing the level of permanent immigration for 2012-13 to 190,000 – this will help address skill shortages the group says. Additionally, the greater emphasis on incentives to encourage the workforce of mature-aged Australians is an important contribution to boosting workforce participation. Related story: Hire baby boomers and get $1,000
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